Soundhound AI (SOUN) risk factors, FY2024 10-K

Risks Related to SoundHound’s Business and Financial Condition

1. 01Our use and provision of AI-powered solutions could lead to operational or reputational damage, competitive harm, legal and regulatory risk and additional costs
2. 02Regulatory and legislative developments related to the use of AI could adversely affect our use and provision of AI-powered solutions in our products, services and business
3. 03The market in which SoundHound operates is highly competitive and rapidly changing and SoundHound may be unable to compete successfully
4. 04Adverse conditions in the Voice AI market or the global economy more generally could have adverse effects on SoundHound’s results of operations
5. 05SoundHound’s strategy to increase cloud connected and embedded products and technologies and expand the number of foreign languages SoundHound understands may adversely affect its near-term revenue growth and results of operations
6. 06Pricing pressures from SoundHound’s customers may adversely affect its results of operations
7. 07SoundHound’s operating results could be materially and adversely affected if it loses any of its largest customers
8. 08Adverse economic conditions or reduced technology spending may adversely impact SoundHound's business
9. 09SoundHound’s operating results may fluctuate significantly from period to period, and this may cause its stock price to decline
10. 10SoundHound depends on skilled employees and could be impacted by a shortage of critical skills
11. 11Cybersecurity and data privacy incidents or breaches may damage client relations and inhibit SoundHound’s growth
12. 12SoundHound’s business is subject to a variety of domestic and international laws, rules, policies and other obligations, including data protection and anticorruption
13. 13Interruptions or delays in SoundHound’s services or services from data center hosting facilities or public clouds could impair the delivery of its services and harm its business
14. 14SoundHound’s business is subject to risks, expenses and uncertainties associated with selling its solutions in locations outside the United States that could adversely affect its operating results
15. 15SoundHound relies on third-party telecommunications and internet service providers, including connectivity to its cloud software, and any failure by these service providers to provide reliable services could cause SoundHound to lose customers and subject it to claims for credits or damages, among other things
16. 16SoundHound’s plans to expand upon and establish new public cloud-based data centers for its U.S. and international operations may be unsuccessful and may present execution and competitive risks
17. 17An element of SoundHound’s growth strategy is to expand its international sales efforts and develop a worldwide customer base. SoundHound’s international expansion may not be successful and may not produce the return on investment it expects
18. 18These risks could harm SoundHound’s international operations, increase its operating costs and hinder its ability to grow its international business and, consequently, its overall business and results of operations
19. 19Tax matters may cause significant variability in SoundHound’s operating results and may impact its overall financial condition
20. 20Forecasts of SoundHound’s market and market growth may prove to be inaccurate, and even if the markets in which it competes achieve the forecasted growth, there can be no assurance that its business will grow at similar rates, or at all
21. 21If SoundHound is unable to acquire new customers, its operating results will be harmed. Likewise, potential customer turnover in the future, or costs it incurs to retain its existing customers, could materially and adversely affect its operating results
22. 22If SoundHound does not successfully anticipate market needs, enhance its existing products, execute on delivering quality products and services, or develop new products and services that meet those needs on a timely basis, it may not be able to compete effectively and its ability to generate revenues will suffer
23. 23If SoundHound spends significant time and effort on research and development and is unable to generate an adequate return on its investment, its results of operations may be materially and adversely affected
24. 24SoundHound’s brand, reputation and ability to attract, retain and serve its customers are dependent in part upon the reliable performance of, and the ability of its existing customers and new customers to access and use, its solutions, including real-time analytics and intelligence
25. 25We may engage in future acquisitions or strategic transactions which may require us to seek additional financing or financial commitments, increase our expenses and/or present significant distractions to our management
26. 26If intangible assets and goodwill that we recorded in connection with our acquisitions, including our SYNQ3 and Amelia acquisitions, become impaired, we may have to take significant charges against earnings, which would have a negative impact on our financial condition and results of operations
27. 27Our acquisitions expose us to risks that could adversely affect our business, and we may not achieve the anticipated benefits of acquisitions of businesses or technologies
28. 28The integration of our acquisitions, and in particular, our acquisition of SYNQ3 and Amelia, may result in significant accounting charges that adversely affect the financial results of our company
29. 29Our acquisitions may result in unexpected consequences to our business and results of operations
30. 30Failure to realize the benefits expected from our recent acquisitions could adversely affect the value of our common stock
31. 31SoundHound has generated substantial net losses and negative operating cash flows since its inception and may continue to do so for the foreseeable future
32. 32SoundHound may require additional capital to continue its planned business operations but may not be able to obtain such capital when desired on favorable terms, if at all, or without dilution to its stockholders
33. 33The loss of one or more key members of SoundHound’s management team or personnel, or its failure to attract, integrate and retain additional personnel in the future, could harm its business and negatively affect its ability to successfully grow its business
34. 34Natural disasters, health epidemics, or other catastrophic events may cause damage or disruption to our operations, commerce and the global economy, and have a negative effect on our business and operations

Risks Relating to SoundHound’s Intellectual Property and Technology

1. 35SoundHound’s use of open source technology could impose limitations on its ability to commercialize its software
2. 36Unauthorized use of SoundHound’s proprietary technology and intellectual property could adversely affect its business and results of operations
3. 37SoundHound’s software products may have bugs, which could result in delayed or lost revenue, expensive correction, liability to its customers and claims against us
4. 38We may be unable to respond quickly enough to changes in technology and technological risks and to develop its intellectual property into commercially viable products

Risks Related to SoundHound’s Class A Common Stock and the Securities Market

1. 39SoundHound’s stock price and trading volume has fluctuated significantly and may continue to fluctuate significantly in the future
2. 40Low trading volume for SoundHound’s Class A Common Stock would amplify the effect of the above factors on stock price volatility
3. 41We do not intend to pay cash dividends for the foreseeable future
4. 42The requirements of being a public company may strain SoundHound’s resources and divert management’s attention, and the increases in legal, accounting and compliance expenses may be greater than SoundHound anticipates
5. 43Risks Applicable to a Dual Class Common Stock Structure
6. 44The Amended Charter provides for a dual-class multiple voting Common Stock structure, and we cannot predict the effect this structure of our Common Stock may have on the market price of our Class A Common Stock
7. 45Delaware law and provisions in our charter documents could make a merger, tender offer, or proxy contest difficult, thereby depressing the trading price of our common stock

Risks Related to U.S. and International Taxation Generally

1. 46Changes in tax laws or exposure to additional income tax liabilities could affect SoundHound’s future profitability
2. 47SoundHound’s ability to use its net operating loss carryforwards and certain other tax attributes may be limited
3. 48Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations